Skip to main content

Was Yankee Stadium value "gamed" to issue PILOTs? Congressional probe could affect AY

Was the valuation of the new Yankee Stadium "gamed" so that the foregone taxes exceeded the expected bond payments, thus allowing a PILOT (payment in lieu of taxes) financing deal?

That's the subtext of the inquiry launched yesterday by the Domestic Policy Subcommittee of the House Oversight and Government Reform Committee, which in March 2007 and October 2007 held hearings regarding tax-exempt financing for sports facilities.

And should the subcommittee, chaired by Rep. Dennis Kucinich (D-OH), find the procedures sketchy, that could cast doubt on similar financing plans for Atlantic Yards arena and the new Mets stadium.

In yesterday's letter, Kucinich was not questioning the use of fixed PILOTs, which would be forbidden under proposed federal regulations, just whether the city and others are cooking the numbers to make a deal with fixed PILOTs work. (Here's coverage from Reuters.)

Drilling down

The subcommittee is investigating the accuracy of representations made to federal agencies and bond investors about the property value of the land and buildings in the stadium construction project.

Kucinich yesterday sent letters to the New York Yankees, the New York City Department of Finance, New York City Economic Development Corporation, Internal Revenue Service, and National Park Service, asking for "all documents relating to any assessment, appraisal, or any other valuation, estimated or final, of the new Yankee Stadium and the land on which the stadium is being built, including the methodologies by which these valuations were calculated."

Fishy numbers?

As I wrote June 27, the city's Independent Budget Office (IBO) certainly thought the annual Yankees PILOT might exceed the foregone taxes and thus render the deal questionable. However, according to a 5/8/08 letter to the IRS and Treasury Department from city and state agencies, the estimated tax for the Yankees would be $62.5 million, while the PILOTs would be only $56.7 million.

But where did those numbers come from? The source for that estimate is not a city agency but a report from Moody's Investors Service, a company that offers credit rating and risk analysis.

No estimate for the Atlantic Yards arena PILOTs was given. However the IBO estimate of $11 million in foregone property taxes for Madison Square Garden would be far less than the estimated $48 million annual payment for $800 million in tax-exempt bonds for the arena. Develop Don't Destroy Brooklyn has raised this point with the IRS and Treasury Department.

At stake for developer Forest City Ratner is a savings of perhaps $165 million compared with taxable bonds. Federal taxpayers bear most of the burden; hence, the backing of the plan by the city and state.

Several levels of concern

Kucinich may personally oppose tax-exempt financing, but eliminating it is politically unlikely. Still, both Congress and federal agencies can on several levels make things difficult for backers of tax-exempt bonds for sports facilities.

First, Kucinich has questioned whether the PILOT deals for the Yankees and Mets should have gone through. In June, he published a letter questioning whether the IRS’s approval of the teams’ financing arrangements was permissible, let alone compelled, as the IRS Chief Counsel had testified.

He asked for clarification of testimony on the issue before the Treasury Department finalizes new rules that would permit a version of such financing.

New rules opposed by city and state

Second, even though Kucinich has questioned the proposed rules, they would remove what the IRS Chief Counsel called a "loophole" and make it impossible to issued fixed PILOTs, but rather make sure they fluctuate, as do regular property taxes.

The city and state are lobbying to make sure that additional bonds for the Yankees and Mets stadiums, as well as bonds for the Atlantic Yards arena, are grandfathered in under the more lenient standard, which allowed fixed PILOTs. As Neil deMause explained on Field of Schemes, bond buyers look askance at PILOT payments pegged to floating annual property assessments, since they "really really don't like uncertainty in their bond payments."

Holding the city and state to the PILOTs deal

Third, as noted above, Kucinich in the letters issued yesterday did not question the concept of fixed PILOTs, just whether the numbers behind them are fishy.

At the Assembly hearing

There are several reasons to question the numbers, including the IBO report and discussion at a State Assembly hearing July 2. At the hearing, Assemblyman Richard Brodsky grilled Seth Pinsky, head of the New York City Industrial Development Authority, about the assessment for the new Yankee Stadium.

Pinsky said he didn’t know the methodology, but said the IRS had given its blessing.

“I believe the IRS accepted the numbers given without examination,” Brodsky responded.

Pinsky said that the bond buyers and rating agencies and associated law firms had vouched for the numbers.

“We’re going to take a much harder look at that,” Brodsky said.

It looks like Congress will be part of that "much harder look."

Comments

  1. I learned with the back and forth that went on when Rich Calder was writing his New York Post article, “YOUR 'NET' LOSS, $2B IN TAXES TO RATNER” April 14, 2008
    http://www.nypost.com/seven/04142008/news/regionalnews/your_net_loss_106461.htm?page=0

    that while Ratner and his people are desperately interested in the public not knowing how much subsidy he is trying to glom onto (even as he demands more of it) Ratner is also dedicated to having those things like the amount of taxes he might be paying shift back and forth to be exactly whatever he wants them to be at any particular point. Ratner and his people seemed willing to argue that taxes might be taxes if they “wanted” to pay them and not be taxes if they chose not to because of exemptions. In this regard, the Ratner relationship with taxes seems much like the relationship Alice finds Humpty Dumpty considers he has with words-

    Consider their Alice’s and HD’s exchange-

    “I don't know what you mean by "glory",' Alice said.
    Humpty Dumpty smiled contemptuously. `Of course you don't -- till I tell you. I meant "there's a nice knock-down argument for you!"'
    `But "glory" doesn't mean "a nice knock-down argument",' Alice objected.
    `When I use a word,' Humpty Dumpty said, in rather a scornful tone, `it means just what I choose it to mean -- neither more nor less.'
    `The question is,' said Alice, `whether you can make words mean so many different things.'
    `The question is,' said Humpty Dumpty, `which is to be master -- that's all.'
    Alice was too much puzzled to say anything; so after a minute Humpty Dumpty began again. `They've a temper, some of them -- particularly verbs: they're the proudest -- adjectives you can do anything with, but not verbs -- however, I can manage the whole lot of them! Impenetrability! That's what I say!'
    `Would you tell me please,' said Alice, `what that means?'
    `Now you talk like a reasonable child,' said Humpty Dumpty, looking very much pleased. `I meant by "impenetrability" that we've had enough of that subject, and it would be just as well if you'd mention what you mean to do next, as I suppose you don't mean to stop here all the rest of your life.'
    `That's a great deal to make one word mean,' Alice said in a thoughtful tone.
    `When I make a word do a lot of work like that,' said Humpty Dumpty, `I always pay it extra.'”

    Do the Ratner people, like Humpty Dumpty believe that because they might “always pay extra” that they are entitled to have the IRS, other public officials, bond buyers, rating agencies and law firms accept and vouch for numbers without examination?

    How “Slithy!”

    Michael D. D. White
    Noticing New York
    http://noticingnewyork.blogspot.com/

    ReplyDelete

Post a Comment

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …

For Atlantic Yards Quality of Life meeting Sept. 19, another bare-bones agenda (green wall?)

A message from Empire State Development (ESD) reminds us that the next Atlantic Yards/Pacific Park Quality of Life Meeting--which aims to update community members on construction and other issues--will be held:
Tuesday, September 19, 2017 @ 6 pm
Shirley Chisholm State Office Building
55 Hanson Place
1st Floor Conference Room
Brooklyn, NY 11217 The typically bare-bones, agenda, below, tells us nothing about the content of the presentation. One thing to look for is any hint of plans to start a new building on the southeast block of the project by the end of the year.

If not, ESD is supposed to re-evaluate a longstanding request from project neighbors to move back a giant wall encroaching on part of Dean Street between Carlton and Vanderbilt avenues. It's said to enclose construction activity, but, in recent months, has significantly served to protect worker parking.

Also, by the way, if you search for Atlantic Yards on Google or the ESD website, it leads to this page for the Atlantic Ya…